Lower for longer under endogenous technology growth

Arbeitspapier

This paper studies monetary policy strategies under endogenous technology dynamics and low r. Endogenous growth strengthens the gains from make-up strategies relative to inflation targeting, especially if policy space is reduced. This result is due to the long-run non-neutrality of money and the hysteresis effects in TFP through which ELB episodes generate permanent scars on long-run aggregate supply. Make-up strategies not only foster the alignment of inflation with target but also support productivity-improving investment in R&D and technology adoption and hence the long-run trend path, provided that the inherent make-up element is sufficiently pronounced. Inflation is less responsive to monetary policy due to the interaction with productivity dynamics. As a result, additional stimulus is required at the ELB and the degree of subsequent overshooting is alleviated. Endogenous growth also generates novel monetary policy trade-offs, most notably credibility challenges, which can be mitigated by confining make-up elements to ELB episodes.

Angaben zum Objekt

• ISBN: 978-92-899-5299-6
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ECB Working Paper ; No. 2714

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles ; Monetary Policy ; Innovation; Research and Development; Technological Change; Intellectual Property Rights: General
• Thema: Make-up Strategies ; ZLB ; Endogenous TFP ; Hysteresis ; Cycle-Trend Interaction

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Schmöller, Michaela ; Spitzer, Martin
• Ereignis: Veröffentlichung
• (wer): European Central Bank (ECB)
• (wo): Frankfurt a. M.
• (wann): 2022

Weitere Informationen

• DOI: doi:10.2866/923309
• Handle: http://hdl.handle.net/10419/269121
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ